Starbucks Sees Revenue Miss in Q1 2023 as China Outfit Slows Growth

American multinational chain of coffeehouses and roastery reserves, Starbucks Corporation (NASDAQ: SBUX) has released its fourth quarter 2022 performance report as revenue slightly misses analyst’s expectations The company said its revenue came in at $8.71 billion, a figure that is down from the $8.78 billion estimated based on analyst’s expectations.

Starbucks remains the coffeehouse of choice for millions of consumers in the United States and around the world. The company posted 75 cents as its Earnings Per Share (EPS), a miss from the consensus estimate of 77 cents.

The firm reported fiscal first-quarter net income of $855.2 million, or 74 cents per share, up from $815.9 million, or 69 cents per share, a year earlier. By a very good margin, Starbucks recorded an impressive growth trend in the United States even though the COVID-19-related outbreak in China, its second-largest market dragged down its performance.

The company’s interim Chief Executive Officer, Howard D. Schultz said the firm recorded a significant growth in the Asian country following the relaxation of its COVID-19 lockdowns. However, took a wrong turn when the country started recording a resurgence in the number of cases following the move.

“With the resurgence has come renewed lockdowns and mobility restrictions pursuant to China’s strict zero COVID policy including in many cities in which we operate, meaningfully reducing traffic in our stores,” Schultz said adding that the company “anticipate the current COVID-related uncertainty to continue and repeat the view we shared on our Q3 call and our Investor Day that while our long-term aspirations for China remain undiminished, we expect the recovery of our business in the country to be nonlinear.”

Starbucks revealed that as many as 1,800 locations in China were under lockdowns, a significant cut of its 6,090 locations in the country.

Starbucks Revenue Forecast

While the currently reported Starbucks revenue dropped below expectations, the company is optimistic that the revenue for the current fiscal year is bound to grow by 10% to 12%. The firm is optimistic its Earnings Per Share will rise by 15% to 20% on the low end.

The company is planning to capitalize on its most active market, the United States. By banking on the growing subscribers to its Loyalty Reward program which topped over 30.4 million, Starbucks maintained a strong backing for its revenue.

Starbucks is known for its innovation in driving customer engagement, a move that has made it secure a partnership with Web 3.0 startup, Polygon. While on his way out of the company as CEO, Schultz teased that an announcement is coming up in February about “an enduring transformative new category” that he discovered while visiting Italy in the past summer.

To him, the category is best described as alchemy. With cost-cutting measures underway, Starbucks is looking to keep up with its growth tracks into the near future. The company’s shares slid 1.77% in the After Hours session to $107.22.

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